The Division of Investment Management has issued a Guidance Update that allows greater use of social media without violating the prohibition on using testimonials.  The Division indicates that publication (including a link thereto) of public commentary from a third social media party site would not violate the Advisers Act if the adviser has no ability to affect the commentary published, the site is completely independent, the commentary cannot be restricted (to favorable comments), and the site allows for viewing of all commentary on a real-time basis.  The Division makes clear that the adviser can in no way affect the content by submitting its own content or suppressing negative comments.  The Division also requires that the third party site display comments in a content neutral manner, although reader sorting is permitted.  An adviser also may refer clients to a third party social media site in advertising.  The social media site may also include “friends” or other communities of users so long as it does not imply a favorable experience with the adviser.   

OUR TAKE: This is sensible guidance from the Division.  However, expect the examination staff to closely scrutinize social media use to ensure compliance with the specific conditions of the Guidance.